Hoping for Plan Behind the “Stress Test”
I’m really hoping that the Obama Administration’s recently announced “stress test”—where they will simulate Great Depression conditions by computer and see what would happen to each major bank in that scenario—is just an excuse to nationalize the banks.
I’m really hoping that the Obama Administration doesn’t ACTUALLY naively think that despite a wide consensus about the lack of soundness in these banks (and more significantly, the market’s complete lack of faith in them), that these banks will come out of the stress test even close to looking like they’re ready for such conditions. Or even solvent at all.
I’m hoping that since they are expecting it, they should have a plan (which has been curiously absent so far). (more…)
Posted on February 23rd, 2009
Filed under: Economics, Politics by James Wang
Finally, A Rational Voice on Aid Policy
Source: NASA
The New York Times recently did a very interesting interview with a certain Dambisa Moyo on aid policy to Africa. She’s apparently an ex-Goldman Sachs banker who is trying to stop aid from being sent to Africa. The New York Times is calling her the “anti-Bono.”
She makes, in my opinion, a valid point that’s long overdue in getting coverage.
In response to what she feels had held back Africa:
“I believe it’s largely aid. You get the corruption — historically, leaders have stolen the money without penalty — and you get the dependency, which kills entrepreneurship. You also disenfranchise African citizens, because the government is beholden to foreign donors and not accountable to its people.”
Long overdue. Besides the points which she made, there’s also the issue of American and European farm policy (which is inseparably linked to aid policy) impoverishing Africa by wholesale annihilation of its agricultural sector. I wrote about this issue of farm policy in the Dartmouth Free Press (which is where the link goes) and other blogs, though haven’t gotten around to doing so here yet. Don’t worry, though, I intend to give you all an earful on it soon.
Regardless, it’s always rather ironic that so many of the things we do out of “kindness” turn out to be so terribly harmful in reality. The Law of Unintended Consequences, or perhaps of Good Intentions. Economics is sometimes counterintuitive. But sometimes, tough love is really the right thing to do.
I really wish American politicians begin to understand that someday.
Posted on February 22nd, 2009
Filed under: Economics, Politics by James Wang
And why the current planned regulation is almost guaranteed to be dismantled
Although some might argue that the point is moot at this point, it appears that the broader financial analyst/reporter community has suddenly decided to adopt collective amnesia and paint financial regulation as the boogeyman that brought the financial industry to its knees. Of course, this is the same community that happily declared the beginning of a “new era” in investment and stocks during the tech boom (which busted), along with enthusiastically invented reasons why the real estate market could never go down even though it has gone both up and down throughout all of human financial history.
Overall, I suppose it shouldn’t come as that much of a surprise, given that track record and the relative ease that one can blame recent changes in the regulatory framework. Especially given that it comes with a very easily swallowed “us versus them” story of greed, corruption, and all those bad things. However, they’ve been wrong before, and I’m going to relatively confidently say they’re wrong again about the reason for the financial crisis—and why, ultimately, all of this hubbub about regulation, for better or worse, is mostly hot air. (more…)
Posted on October 4th, 2008
Filed under: Economics by James Wang
